Net Dollar Retention (NDR) is a revenue retention metric that shows how much recurring revenue is retained from a starting group of customers over a period, after accounting for expansions (upgrades, added seats, cross-sells) and losses (downgrades and churn). It is usually expressed as a percentage and is commonly used in subscription businesses to measure whether growth is coming from existing customers.
How NDR Is Calculated
NDR is typically calculated on a cohort of customers that existed at the start of the period.
Common formula (recurring revenue based):
NDR = (Starting ARR + Expansion ARR − Contraction ARR − Churned ARR) / Starting ARR
Then multiply by 100 to express it as a percentage.
Key inputs:
- Starting ARR or MRR: Recurring revenue from the cohort at period start
- Expansion: More revenue from the same customers (upsell, usage growth, added products)
- Contraction: Less revenue from the same customers (downgrades, fewer seats, lower usage)
- Churn: Revenue lost from customers who left entirely
How to Interpret NDR
- NDR above 100%: The cohort grew in revenue despite downgrades and churn, meaning expansions outweighed losses.
- NDR at 100%: The cohort stayed flat in revenue, meaning expansions exactly offset losses.
- NDR below 100%: The cohort shrank in revenue, meaning losses outweighed expansions.
NDR is most useful when tracked consistently by the same method (ARR vs MRR, monthly vs annual period, same revenue definitions).
NDR vs GRR and Why Both Matter
- Gross Revenue Retention (GRR): Measures revenue kept without counting expansion. GRR focuses on preventing losses.
- Net Dollar Retention (NDR): Measures revenue kept including expansion. NDR reflects both retention and growth within existing accounts.
A business can have strong NDR due to expansions while still having weak GRR if churn or downgrades are high, so both metrics are often reviewed together.
NDR in AI-Assisted Revenue Operations
In modern RevOps workflows, NDR is often automated using CRM, billing, and product-usage data:
- Automated cohort building: Define cohorts by plan, segment, acquisition channel, or start month.
- Expansion and churn attribution: Use subscription events plus product signals to label drivers (seat growth, usage-based overages, downgrades).
- Forecasting and alerts: Trigger playbooks when contraction risk rises or when accounts show expansion signals.
- Data quality checks: Automated reconciliation between billing and CRM helps ensure NDR is computed from consistent revenue sources.
Frequently Asked Questions
What time period is used for NDR?
Most teams calculate NDR monthly, quarterly, or annually, using the same cohort definition each time.
Does NDR include new customers?
No. NDR measures changes in revenue from an existing starting cohort only.
Is NDR based on ARR or MRR?
It can be either, but it should be consistent. SaaS companies often report NDR using ARR for annual reporting and MRR for monthly tracking.
What counts as expansion for NDR?
Any recurring revenue increase from the same customers, such as upgrades, added seats, higher usage tiers, or added products.
Can NDR be high even with high churn?
Yes. Large expansions from remaining customers can offset churn, which is why GRR is often reviewed alongside NDR.
